Dispute Resolution 101: Arbitration, Adjudication & Mediation
A construction or commercial dispute has arisen. Before committing to a course of action, it pays to understand the three main dispute resolution options available in Singapore — what each one does, when it applies, and what it costs.
Tan Joo Seng
Founder & Director. Tyto LLC
What is Alternative Dispute Resolution (ADR)?
Alternative dispute resolution (ADR) refers to the range of processes and techniques that allow disagreeing parties to resolve their disputes short of litigation in Court. It is a collective term for the ways parties can settle disputes, with or without the help of a third party.
Three commonly used ADR mechanisms for commercial and construction disputes in Singapore are Arbitration, Mediation and Adjudication. Each serves a distinct purpose — choosing the right one early can save significant time and cost.
Factor
Arbitration
Mediation
Adjudication
Typical timeline
1 – 3 years
1 day
5 – 7 weeks
Binding outcome?
Yes – Final Award
Only if agreed
Yes – interim
Who decides?
Arbitrator
Parties themselves
Adjudicator
Right of appeal?
Very limited
N/A
Review
Privacy
Private
Confidential
Private
Best suited for
Large / complex disputes
Preserving relationships
Unpaid progress claims
Arbitration
Arbitration is a consensual process where parties agree to appoint an arbitrator to adjudicate their disputes. The agreement to arbitrate is usually found in an arbitration clause in the contract signed by the parties. Most construction contracts in Singapore include an arbitration clause.
Parties are free to select the arbitrator — who should ideally be familiar with the subject matter of the dispute. For example, a senior quantity surveyor may be appointed to arbitrate a dispute over the value of variation works. Parties are also free to select the procedural rules governing the arbitration.
There are two types of arbitration: ad hoc arbitrations (not subject to institutional rules) and institutional arbitrations governed by the rules of established arbitral institutions such as the SIAC, the Singapore Institute of Arbitrators (SIArb), or the International Court of Arbitration.
Enforcement: Arbitration awards are binding on the parties and enforceable by the Singapore Courts as judgments of the Court. Awards made in Singapore are also recognised internationally in countries that are signatories to the New York Arbitration Convention — making arbitration the preferred route for cross-border disputes.
Parties dissatisfied with an award may appeal to the Courts or apply to set it aside, but only under limited and narrow circumstances.
Mediation
Mediation is a process where the disputing parties agree to negotiate and attempt to settle their dispute with the help of a neutral third party mediator. Like arbitration, both parties must agree to use it.
Mediation may be carried out under the auspices of the Singapore Mediation Centre (SMC), or the State Courts Centre for Dispute Resolution where there is pending civil litigation in the State Courts. Parties may agree on a mediator or have one appointed by the relevant institution.
Key point: A mediator cannot make binding decisions or adjudicate on the merits of the dispute. The mediator’s role is to facilitate dialogue and help the parties reach a negotiated settlement. Mediations are without prejudice — matters discussed cannot be tendered as evidence in Court if the mediation fails.
If mediation succeeds, the parties enter into a binding settlement agreement recording the terms of settlement. Mediation works best when both parties genuinely want to resolve the dispute and — where applicable — preserve the commercial relationship.
Adjudication
Adjudication is a statutory dispute resolution process specifically designed for progress payment disputes in construction contracts. It is provided by the Building and Construction Industry Security of Payment Act 2004 (SOP Act) with the purpose of easing cash flow in construction projects.
Adjudication is available to a party (the Claimant) who has carried out construction works and has not received payment. The process is engaged by lodging an adjudication application with the SMC. The dispute is heard and decided by an adjudicator appointed by the SMC.
Critical: The adjudicator’s decision (the Adjudication Determination) is temporarily binding on the parties and resolves only the dispute over a single progress payment. Other types of disputes — defects, delays, termination — must be dealt with via arbitration or mediation.
There is no right of appeal to Court. However, the Court may set aside an adjudication determination if there has been procedural impropriety (such as a breach of natural justice) or illegality (such as fraud).
A claimant who has not received payment of the adjudicated amount may enforce the determination by converting it into a judgment of the Court, suspending work, or seeking direct payment from the principal of the respondent. In some circumstances the claimant may also claim a lien over the goods supplied.
Choosing the right route
ADR should be seriously considered as a viable alternative to litigation. Nevertheless, there are many factors to weigh when determining the right mode of dispute resolution — including the nature of the dispute, the cost, the time it will take, and whether there is a business relationship that should or could be preserved.
Our recommendation: seek legal advice before committing to a route. A common and effective sequence for construction disputes is: adjudication to obtain interim payment quickly, followed by mediation to attempt a full settlement, with arbitration as the fallback if mediation fails.
ABOUT THE AUTHOR
JS
Tan Joo Seng
Founder & Director, Tyto LLC · SMC Senior Adjudicator · Panel Arbitrator: SIAC, SIArb
IN THIS GUIDE
01
What is ADR?
03
Arbitration.
02
Mediation
04
Adjudication
05
Choosing the right route
Have a specific question about this topic?
Book a free 30-minute consultation — we’ll give you plain advice with no obligation.